McMennemin & Anor v FC of T

The AAT has decided that it did not have jurisdiction to review the Commissioner's decision to refuse to make a determination under section 292-465External Link of the ITAA 1997 to disregard excess non-concessional contributions made by a retired couple. However the tribunal went on to state their view would be consistent with the Commissioner's explanation of special circumstances in PS LA 2008/1.

Facts

The taxpayers (Mr and Mrs McMennemin) each initially contributed $138,484 to their super fund on 14 December 2006.

For 2006-07 they were each eligible for the maximum age-based deduction of $105,113. This amount is considered to be the concessional contributions cap for each of them within the meaning of Division 292.

The remaining amount of the contribution (that is, $33,371) was considered a non-concessional contribution because they were not included in the fund's assessable income.

The 2006-07 income year was one of change in the super rules and one in which the new law had retrospective application. In particular, subject to any applicable work test, people would be able to make up to $1 million of post-tax (non-concessional) contributions between 10 May 2006 and 30 June 2007.

In October or November 2006, Mr McMennemin discussed the $1 million cap and their initial contributions with the fund's accountant and auditor.

Mr McMennemin understood, from the advice he was given, that he and his wife could each make a contribution of $1 million to the fund on or before 30 June 2007. Therefore, on 30 June 2007, Mr and Mrs McMennemin each made a further $1 million non-concessional contribution and lodged their tax returns on 16 October 2007.

Mr McMennemin felt that he had not been made aware that their initial contributions had to be deducted from the $1 million cap.

Mr and Mrs McMennemin did not intend to make any contributions in excess of the contributions caps applying at the relevant times. Had they understood that their contributions of $1 million would mean exceeding the non-concessional cap by $33,371, neither would have done so. Instead, they would have made a contribution of a smaller amount that kept them under the cap.

The Commissioner decided that Mr and Mrs McMennemin had exceeded the non-concessional contributions cap applicable for the income year ending 30 June 2007 by an amount of $33,371 and issued each of them with an assessment of $15,517.50 excess non-concessional contributions tax.

After receiving the ECT assessments, Mr and Mrs McMennemin applied to the Commissioner under section 292-465External Link requesting that he either disregard the excess non-concessional contributions or allocate them for the purposes of another income year.

The Commissioner decided that the circumstances were not special circumstances within the meaning of paragraph 292-465(3)(a) of the ITAA 1997 and that making the determination would not be consistent with the objective of Division 292, as required by paragraph 292-465(3)(b).

Mr and Mrs McMennemin objected to the ECT assessments and the Commissioner disallowed their objections.

Decision

The AAT said that provided a person made an objection to an ECT assessment and the Commissioner made an objection decision, that person could seek review of the ECT assessment by applying to the AAT for its review.

Whether a particular decision or determination was reviewable as part of the review of that ECT assessment depended on whether it was made as part of the Commissioner's assessment function or part of his administrative function.

The AAT also said that section 292-465 gave a person an opportunity to alter the factual basis on which their assessment of ECT was to be made but it was no more than that. The Commissioner's decision to refuse to make a determination under section 292-465 could not be regarded as part of making the original ECT assessment because it was not possible to apply for a determination before the ECT assessment was made.

Accordingly, a determination under section 292-465 could not be properly characterised as part of the procedure or mechanism by which the excess non-concessional contributions were ascertained and the ECT ascertained but as a matter preceding the making of the ECT assessments.

The AAT considered that a person in the position of Mr and Mrs McMennemin would have foreseen when they made their second contribution on 30 June 2007 that they would have excess non-concessional contributions.

It was not satisfied that Mr and Mrs McMennemin's circumstances were special circumstances as there was nothing unfair, unintended or unjust about the ordinary application of the provisions of Division 292 in the circumstances.

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